Boeing expects strong demand from Southeast Asia to continue

Boeing forecasts Southeast Asia's demand for passenger aircraft to reach 4,210 units over the next 20 years, with a value of $650 billion.

This is 460 aircraft more than its previous forecast for the region, which was released in February 2016. In value terms, the new forecast for the next twenty years is $100 billion greater than Boeing's $550 billion forecast in 2016.

"Southeast Asia continues to be one of fastest growing markets in the world – and a key focus area for Boeing – as the region accounts for more than 10 percent of the total global demand," says Dinesh Keskar, senior vice-president of Asia Pacific and India Sales, Boeing Commercial Airplanes.

Keskar revealed Boeing's outlook during a media presentation at the company's Singapore office. The Southeast Asia outlook is a subset of the company's Current Market Outlook that was released at the Paris Air Show in June.

The vast majority of the aircraft bound for Southeast Asia will be narrowbodies, comprising 3,230 aircraft, or 77% of the total. It expects demand for just 40 regional jets, 610 small widebodies, and 320 medium-to-large size widebodies.

RPKs for traffic within Southeast Asia will grow 7.2% annually, while RPKs between the region and China will grow by 6.3% annually, South Asia by 8.5%, and the Middle East by 5.4%. The manufacturer also predicts that the new widebody aircraft, such as the 787 and Airbus A350, will allow RPKs on direct traffic between Southeast Asia and North America to grow 5.3% annually.

Keskar adds that the main driver of traffic growth in the region will continue to be low-cost carriers.

A helpful tailwind is that Southeast Asian currencies have tended to appreciate against the dollar since early 2016. This helps the region's airlines better service their dollar-denominated commitments, such as for aircraft and fuel.

Keskar stressed, however, that the outlook is not entirely positive. Capacity growth has outpaced demand in the region, pressuring yields. Infrastructure also remains a challenge in some countries. Fuel prices have also risen 56% since early 2016.

Boeing is very bearish on Southeast Asian demand for new maindeck freighters, expecting demand of less than ten in the coming two decades. Keskar says the traditional maindeck cargo market has been up-ended by passenger aircraft such as the 777, which can accommodate up to 30t of cargo in their bellyholds.

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